Thousands erroneously claim electric car tax break

General Motors has just begun to mass market its Chevrolet Volt. It has sold 647 of them since December.

WASHINGTON — Car companies like General Motors and Nissan are slowly rolling out rechargeable electric cars. But that didn't stop thousands of U.S. taxpayers, including prisoners and some IRS employees, from incorrectly claiming lucrative tax credits for the electric vehicles last year.

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A Treasury Department inspector general report says nearly 13,000 taxpayers erroneously claimed about $33 million in credits for plug-in electric and alternative vehicles during the first six months of 2010.

The inspector general says about 20 percent of the $163.9 million in credits provided to taxpayers were claimed in error. The report did not indicate whether the taxpayers made the claims out of confusion or purposely tried to take advantage of incentives for which they were not qualified.

President Barack Obama has pushed for 1 million electric cars on the road by 2015 and the tax breaks are part of that strategy. The government has offered numerous incentives to drum up interest in the vehicles, including a $7,500 tax credit for a plug-in electric drive motor vehicle and incentives for converting a car into a plug-in.

Auto companies are just starting to mass market the vehicles. Since December, GM has sold 647 Chevrolet Volts, an electric car with a backup gasoline-powered engine. During the same period, Nissan sold 106 versions of the Leaf, which is powered by a rechargeable battery.

But a Treasury Department inspector general review of provisions in the economic recovery law found problems with thousands of taxpayers claiming the credits for cars that failed to qualify. For example, some car owners tried to claim the $7,500 credit for their Hummer H3, Dodge Durango or Cadillac Escalade. Someone claimed it for a golf cart.

The report said some IRS employees erroneously claimed the credits. They were referred to the department's office of investigations for further review. Even prisoners tried to take advantage. The inspector general found that 29 prisoners received $49,926 in vehicle credits even though they were incarcerated throughout 2009.

The IRS agreed with a series of recommendations made by the inspector general to recover erroneous credits and to make changes to manuals and software systems to ensure that taxpayers don't claim vehicles that fail to qualify.

The IRS said in a statement it was "committed to running a balanced program on recovery-related provisions, making sure we process taxpayer claims quickly and accurately while safeguarding against improper payments." The IRS said it was "taking aggressive steps to recapture the credits people erroneously claimed."